Wireless

Verizon Wireless and AT&T have ended their public legal spat over advertising, and have thus agreed to stop complaining about each other's advertising campaigns.

On Wednesday AT&T announced it dropped its suit against Verizon Wireless for allegedly misleading customers by showing its weak 3G coverage. And Verizon said it agreed to drop a suit it filed earlier this year against AT&T for claiming it had the "More Bars in More Places," the "Best Coverage," and the "Best Worldwide Coverage."

In its amended suit filed in August, Verizon said that AT&T had no basis to refer to its network as the best, because Verizon claims in its own advertising to have "America's Most Reliable 3G Network" and "America's Best 3G Network."

"Through these advertisements, AT&T claims to have a wireless network that is superior, both qualitatively ("More Bars") and quantitatively ("More Places") to the wireless networks of all other U.S. wireless carriers, including Verizon Wireless, both in the United States and worldwide, when in fact, none of those claims is true," Verizon said in its complaint.

But now it looks like AT&T and Verizon have made peace with one another, as AT&T dropped its case in Atlanta and Verizon dismissed its case filed in New York.

However, the lawsuits bring up an interesting trend that was noted recently in an article published by The New York Times. Increasingly, companies are suing each other over claims made in their advertising campaigns.

In addition to AT&T and Verizon Wireless, other longtime foes, such as shampoo and soap makers Pantene and Dove, dog food makers Science Diet and Iams, and soup companies Campbell Soup and Progresso have all haggled over ads, challenging competitors to prove their claims.

Some complaints over "misleading" advertising are filed with the National Advertising Division of the Council of Better Business Bureaus, which is the industry's main self-regulatory program for national ads. But others go to court and file lawsuits under the Lanham Act, which was passed in 1946 to strengthen trademark law. Verizon's lawsuit cited the Lanham Act.

While these lawsuits and complaints may be legitimate, the truth is that most consumers take these advertisements claiming to be the "best" or the "strongest" at anything with a grain of salt. And there is some indication that the mere publicity from these lawsuits can backfire on companies, giving consumers a negative impression of the company that files the lawsuit.

It can be argued that this has happened to AT&T. There have already been numerous reports about problems with AT&T's network, particularly for iPhone users. And when the company filed its lawsuit against Verizon, many consumers expressed anger at AT&T for whining about the advertisement, when many felt that the claims expressed in the advertisement were true.

By contrast, Verizon's lawsuit against AT&T was not well-publicized. In fact, most technology reporters and bloggers hadn't even known about or mentioned the suit until Wednesday when the two companies agreed to drop litigation against each other. It remains to be seen if consumers will also deem the dismissed Verizon lawsuit a bit whiny.

AT&T has dismissed its lawsuit against Verizon Wireless for using an advertisement that AT&T complained confused customers about its 3G wireless coverage.

(Credit: Verizon Wireless)

On Wednesday, AT&T formally dismissed the lawsuit. Last month, the wireless operator suffered a major legal setback when a judge rejected the company's request to force Verizon to pull its "There's A Map For That" advertising campaign.

AT&T filed its lawsuit in federal court in Atlanta in early November asserting that Verizon Wireless' advertisements mislead customers by suggesting that AT&T subscribers cannot access wireless Internet services throughout its network. AT&T has called the ads blatantly false and has said that the commercials have caused irreparable harm to the company.

The advertisements that Verizon is running show two maps that each indicate 3G wireless coverage. One map shows coverage for Verizon and the other depicts AT&T's coverage. Verizon just recently started airing another commercial that depicts Santa Claus' reindeer referring to Verizon's and AT&T's 3G coverage maps.

AT&T has also started running its own advertisements that are critical of Verizon Wireless. The ads feature Luke Wilson and slam Verizon for not allowing users to talk and surf the Web at the same time, something that wireless subscribers can do on AT&T smartphones.

Verizon Wireless declined to comment on the news of the dismissal. And AT&T also declined to comment further on the matter.

AT&T has lost the first battle in a legal war against Verizon Wireless to force the company to stop showing advertisements that compare its 3G wireless network coverage with Verizon's coverage.

A federal judge in Atlanta on Wednesday declined to grant AT&T a temporary restraining order that would force Verizon to stop showing the ads.

(Credit: Verizon Wireless)

AT&T filed a lawsuit in federal district court in Atlanta earlier this month asserting that Verizon Wireless' advertisements mislead customers by suggesting that AT&T subscribers cannot access wireless Internet services throughout its network. AT&T has called the ads blatantly false and has said that the commercials have caused irreparable harm to the company.

AT&T had asked the court to keep Verizon from running the advertisements until the matter is settled in court. But the judge on Wednesday declined this request.

The advertisements that Verizon is running show two maps that each indicate 3G wireless coverage. One map shows coverage for Verizon and the other depicts AT&T's coverage.

AT&T doesn't argue that the maps are incorrect in terms of showing its 3G coverage. But it says that Verizon is misleading customers by implying that they cannot use their phones or access the mobile Web when they aren't in 3G coverage areas. The reality is that customers can make phone calls and access the Internet from their phones using the company's slower EDGE or GPR networks.

Verizon argues its advertisements are simply pointing out the fact that AT&T has not invested enough in upgrading its network to handle increased traffic from smartphone devices, such as the Apple iPhone.

Verizon has modified its ads slightly to indicate that the map applies only to 3G coverage and not regular 2.5G service, which is adequate for making voice calls and connecting to the wireless Internet at slower speeds.

Verizon said in its 53-page rebuttal to the court earlier this week that AT&T is not suing Verizon because the claims are false, but because it doesn't want to face the truth about its network.

AT&T said it plans to press on with its case despite the fact that it lost the latest legal battle.

"While we are disappointed with the court's decision on our request for a temporary restraining order, we still feel strongly that Verizon's ads mislead consumers into thinking that AT&T doesn't offer wireless service in large portions of the country, which is clearly not the case," Mark Siegel, a spokesman for AT&T, said in an e-mail. "We look forward to presenting our case to the court in the near future."

Verizon Wireless said AT&T is suing the wireless operator not because its recent ads are untrue, but because the truth hurts.

AT&T earlier this month filed a lawsuit claiming that Verizon is misleading customers by suggesting that AT&T subscribers cannot access wireless Internet services throughout its network. In the opening paragraph of its legal rebuttal to the suit, Verizon very plainly surmised its argument: "AT&T did not file this lawsuit because Verizon's 'There's A Map For That' advertisements are untrue; AT&T sued because Verizon's ads are true and the truth hurts."

The rebuttal filed on Monday in a Georgia district court was in response to two complaints AT&T filed with the court asking that the Verizon advertisements be pulled from the airwaves. AT&T has called the claims in the advertisement "false" and "misleading." And the company claims it has caused "irreparable harm" to AT&T's wireless business.

Verizon representatives have responded to the press on these claims. But now the company has filed its official response to the court in a 53-page document that lays out the company's defense.

Verizon argues its advertisements are simply pointing out the fact that AT&T has not invested enough in upgrading its network to handle the tidal wave of data traffic experienced by the release of the Apple iPhone, which AT&T sells exclusively in the U.S. Verizon says that it is simply highlighting what many AT&T iPhone customers have already recognized.

"In the final analysis," Verizon said in its filing. "AT&T seeks emergency relief because Verizon's side-by-side, apples-to-apples comparison of its own 3G coverage with AT&T's confirms what the marketplace has been saying for months: AT&T failed to invest adequately in the necessary infrastructure to expand its 3G coverage to support its growth in smartphone business, and the usefulness of its service to smartphone users has suffered accordingly. AT&T may not like the message that the ads send, but this Court should reject its efforts to silence the messenger."

Verizon's initial advertisement, which began airing on TV November 3, shows two maps with red and white splotches indicating 3G wireless coverage. The white area indicates no 3G coverage, and the red indicates areas where 3G service is available. In the ad, Verizon shows an AT&T map that has lots of white spaces, whereas the Verizon map is almost covered in red.

AT&T claims the ad is misleading because it implies that AT&T customers can't use their phones and cannot access the mobile Internet in areas where the carrier does not offer 3G wireless coverage. The truth is that AT&T customers can use their phones and they are able to access the wireless Net using the company's slower EDGE network.

Verizon has modified its ad slightly to indicate that the map applies only to 3G coverage and not regular 2.5G service, which is adequate for making voice calls and connecting to the wireless Internet at slower speeds.

In its filing, Verizon argues that its ads refer explicitly and solely to AT&T's 3G network coverage. And therefore the advertisements should be evaluated on that basis. Verizon claims that it is a fact that its 3G wireless network covers five times more geographic area than AT&T's 3G network. And because this is an undisputable fact, the company should be able to use this in its advertisements.

Verizon pointed to AT&T's own advertisement claims that it operates the nation's fastest 3G wireless network.

"Despite the far smaller size of its 3G network, AT&T has spent tens of millions of dollars making its 3G network, which it dubs the "Nation's Fastest 3G Network," the centerpiece of its national advertising since at least the summer of 2008," Verizon argued. "AT&T now is attempting to silence Verizon's ads that include maps graphically depicting the geographic reach of AT&T's 3G network as compared to Verizon's own 3G network because AT&T does not like the truthful picture painted by that comparison."

But AT&T still asserts that the advertisements Verizon is running are misleading.

"We filed the lawsuit because Verizon's ads mislead customers into thinking that AT&T does not offer wireless service in the vast majority of the country," said Mark Siegel, a spokesman for AT&T. "We look forward to presenting our case."

AT&T wants to set the record straight about its 3G wireless coverage.

The company has placed a statement on its Web site defending itself against critical advertisements Verizon Wireless has been running that highlight areas of the country where AT&T lacks 3G coverage.

"We typically don't respond to competitors' advertising," AT&T said in its statement. "However, some recent ads from Verizon are so blatantly false and misleading that we want to set the record straight about AT&T's wireless-data coverage."

Verizon's initial advertisement, which began airing on TV a couple of weeks ago, mocks Apple's "there's an app for that" slogan. Instead, Verizon's advertisement says "there's a map for that."

The ad campaign shows two maps with red-and-white splotches. The white area indicates no 3G coverage, and the red indicates areas where 3G service is available. In the ad, Verizon shows an AT&T map that has lots of white spaces, whereas the Verizon map is almost covered in red.

AT&T has filed a lawsuit claiming that the ad is misleading because it implies that AT&T customers can't use their phones in areas where the carrier does not offer 3G wireless coverage.

Verizon has modified its ad slightly to indicate that the map applies only to 3G coverage and not regular 2.5G service, which is adequate for making voice calls and connecting to the wireless Internet at slower speeds.

But AT&T is still not happy with the adjustment, and the company wants Verizon to stop running the ads or to alter them further.

What's more, AT&T has added a complaint about a newer Verizon commercial, which characterizes the iPhone as a new arrival to the Isles of Misfit Toys, to the lawsuit. The Isles of Misfit Toys refers to an island where broken toys and misfits would go in the popular Rudolph the Red Nosed Reindeer Christmas special.

In the ad, a toy elephant asks the iPhone what it's doing with the misfits, since it has so many cool apps. The iPhone doesn't really answer, instead flashing the AT&T map, which indicates the spotty 3G coverage. All the toys seem to understand.

AT&T hasn't launched ads of its own to combat the Verizon commercials. But the company's statement on its Web site is its attempt to refute many of Verizon's claims. For example, AT&T points out that its data coverage reaches 303 million people, or 97 percent of the U.S. population, using a mix of wireless technologies. Of course, AT&T admits that not all of these customers are able to access the faster 3G network; only 75 percent of the U.S. population can get access to AT&T's 3G wireless network.

AT&T also emphasizes in its statement that it has twice as many smartphone customers as Verizon. And it says it offers the most popular smarpthone in the industry, the Apple iPhone. AT&T says it offers more mobile applications than its competitors. And finally, it points out that it has the fastest 3G wireless network in the nation, a claim some customers who use the service may question.

There's no question that Verizon's ads are hard-hitting. But it's difficult to say whether they have affected consumers' purchase decisions. Anecdotally, it looks like the ads might have helped Verizon win a few customers. One Motorola Droid customer I interviewed at a Verizon store in New York this week said he decided not to buy the iPhone because of the Verizon ads he saw on TV.

"I was considering the iPhone," said Henry Goodison, of the Bronx borough. "But I saw a commercial about AT&T's 3G coverage. It said, 'Here is AT&T's 3G coverage, and here is ours.' And I thought it would be better to have Verizon, if I travel to another state, where AT&T doesn't have 3G coverage."

It was bound to happen. AT&T is suing Verizon Wireless over its "There's a Map for That" advertising campaign.

When I first saw the advertisements on TV, I thought for sure that AT&T or Apple would file a lawsuit claiming the advertisement was too similar to the iPhone's "There's an App for That" slogan.

I was right about one thing. AT&T is suing Verizon. But I was wrong about the reason behind the suit.

AT&T's beef isn't over the wording of the "There's a Map for That" slogan. Instead the company claims that Verizon is misleading customers into thinking that AT&T subscribers are not able to use their phones in areas where the carrier does not offer 3G wireless coverage.

In the suit that AT&T filed Tuesday in Atlanta federal court, AT&T describes how Verizon's ad campaign shows maps with white spaces, which it claims misleads consumers into thinking that AT&T has no wireless coverage in particular areas of the country.

But that is not the case. The white spaces actually indicate where AT&T does not have 3G wireless access. It doesn't indicate that AT&T has no wireless coverage. In fact, in most parts of the country, AT&T has a 2.5G Edge network.

AT&T doesn't dispute the fact that its 3G wireless service is not in every region of the country indicated on the map. But the company says that the advertisement makes consumers believe that AT&T has no service in those areas, which implies that subscribers can't use their phones at all in those regions.

"Contrary to the misleading message conveyed by Verizon's advertisements, AT&T customers can fully use their wireless devices outside of a '3G' coverage area and undisputedly have coverage in areas depicted by the white or blank spaces on the maps used in Verizon's advertisements," AT&T said in its complaint.

AT&T also asserts in its complaint that it is "losing incalculable market share, invaluable goodwill that it has spent billions of dollars to develop among consumers, and the significant investment it has made in its wireless network."

AT&T is not asking Verizon to stop its ad campaign entirely. And it's not asking its rival to change the wording of its advertising. What AT&T wants is for Verizon to stop showing maps of AT&T's 3G coverage areas that it claims mislead customers into thinking they can't use their phones in non-3G areas.

AT&T has asked for a temporary restraining order against Verizon so that it cannot benefit from the ads while the companies await a permanent injunction.

Verizon Wireless, which is owned jointly by Verizon Communications and Vodafone Group, said AT&T's suit is without merit. The company has said that the ads clearly state that voice and data services are available outside 3G areas.

"The ads are serving to inform customers where the coverage critical to operating a smartphone is available," said Brenda Raney, a Verizon Wireless spokeswoman. "Considering their limited 3G coverage, our competitor should examine whether they are misleading customers with their fastest 3G network claim."

Motorola Droid

(Credit: Motorola)

The hard-hitting advertising campaign and AT&T's lawsuit are just the latest signs that competition in the U.S. wireless market is reaching a fever pitch. More than 89 percent of Americans already subscribe to a cell phone service, according to the CTIA. This means that for wireless operators to grow, they must lure new subscribers from competitors.

Verizon Wireless and AT&T control the lion's share of the wireless market as the No.1 and No. 2 operators in the country, respectively. Sprint Nextel and T-Mobile USA are the other two main national carriers. Sprint has steadily been losing customers for several quarters. And T-Mobile has been unsuccessful in becoming a major threat to the big two operators.

As a result, the rivalry between the two largest wireless companies, Verizon and AT&T, is heating up. Verizon has historically had a very good reputation for having a reliable network with broad network coverage. But even with a strong network, the company has lacked cool phones, which consumers have complained about.

Meanwhile, AT&T's network has had a mediocre reputation at best, but the carrier is the exclusive wireless operator in the U.S. for Apple's iPhone. And despite the fact that subscribers have been complaining about poor service and spotty coverage on AT&T's network, new subscribers are still flocking to the carrier to buy the popular iPhone. In the third quarter, AT&T reported it had signed up a net of 2 million subscribers. Verizon signed up 1.2 million new subscribers for the same period.

But now Verizon is about to launch a phone that many analysts believe could give the iPhone a run for its money. The Motorola Droid, which uses Google's Android operating system, goes on sale Friday. And since the phone was revealed to analysts and product reviewers last week, it's been getting high marks.

Verizon's top marketing executive John Stratton said the ad campaign for the new Droid will be the biggest Verizon has ever launched. But he said that the company will focus more on what the Droid can do and less on what other devices or competitors cannot do. One thing is clear, the battle for wireless subscribers is likely to get nastier.

As a consumer, I hope this intense competition eventually leads to better services, cooler devices, and lower prices. But we'll just have to wait and see. Right now, it just looks like a war of words.

Sprint Nextel has settled its legal dispute with its wireless affiliate iPCS by striking a deal to acquire the company in a transaction valued at around $831 million.

Sprint announced Monday that it plans to buy iPCS for $24 a share, a 34 percent premium to its Friday closing price of $17.88, which means the company will be spending about $426 million in cash. Sprint also agreed to assume $405 million of debt, bringing the total price tag to $831 million.

The deal is expected to close in late 2009 or early 2010. And once it is completed, the companies plan to suspend litigation.

The original agreement between Sprint and iPCS precluded Sprint from operating a competing wireless service in its territory. When the company bought Nextel in 2005, it violated this agreement, iPCS has argued.

The courts have sided with iPCS on this issue. Last year, the Supreme Court of Illinois upheld a lower court's ruling that Sprint must stop owning, operating, and managing its Nextel iDEN network in Sprint affiliate iPCS's territory.

Sprint was given 360 days to divest itself of the iDEN assets in that territory or strike some kind of deal with iPCS. Given that Nextel is the only operator that has used the iDEN wireless technology in the U.S., divesting these assets appeared unlikely.

As the deadline looms, it appears that Sprint was either unable or unwilling to get rid of its Nextel iDEN assets in this area and has instead decided to strike a deal with the company.

Once the merger is completed, Sprint said that it will no longer have to divest its iDEN network in the iPCS markets.

Sprint's merger with Nextel has been blamed for many of the problems facing the wireless operator today. One if its main problems has been a steady loss of valuable wireless subscribers. Since its new CEO Dan Hesse came on board nearly two years ago, the company has worked to improve its network and customer service. It's also been trying to repair its damaged reputation.

But even Hesse has admitted that customer perceptions do not change overnight.

Sprint said the iPCS transaction is valued at 6.4 times estimated 2010 adjusted earnings before income, taxes and depreciation. The company forecasts $30 million of annual cost savings and expects the deal to add to free cash flow in 2010.

Updated at 5:10 p.m. PDT with eBay comment.

Joltid, a peer-to-peer software company established by Skype's founders, filed a copyright suit against Skype Wednesday alleging Joltid's technology is being infringed on by Skype users "in the United States at least 100,000 times each day."

Just the latest in an ongoing license dispute between the popular VoIP service and its developers, the lawsuit, filed in Northern California U.S. District Court, seeks an injunction and damages, which Joltid "reasonably believes are amassing at a rate of $75 million daily," according to the suit.

Also listed as defendants are Skype's current owner eBay, as well as investors in a consortium that earlier this month signed a deal with eBay to acquire a 65 percent stake in Skype, with eBay retaining 35 percent.

"Skype has infringed Joltid's copyrights," a company spokesman said in a statement. "Joltid will vigorously enforce its copyrights and other intellectual property rights in all of the technologies it has innovated."

"Their allegations and claims are without merit and are founded on fundamental legal and factual errors," eBay spokesman John Pluhowski said in a statement.

The lawsuit has the potential to at least complicate the ongoing sale of Skype. In the past, however, eBay has said it's working on its own software to replace what it gets from Joltid.

In 2006, eBay bought Skype for $2.6 billion, but co-founders Janus Friis and Niklas Zennstrom retained the rights to Skype's key peer-to-peer technology--Global Index Software--via the Joltid company they formed.

Joltid terminated its license for the software after learning that Skype had allegedly acquired unauthorized versions of the source code, made unauthorized modifications, and disclosed the software to third persons, according to the lawsuit.

The two companies have been involved in a separate lawsuit in the U.K. over that license termination, but the case isn't set to go to trial until June 2010. Referring to that suit, eBay's SEC filing regarding the sale of Skype says "consummation of the deal was subject to 'no settlement of the pending litigation with Joltid Limited having been effected without the consent of the Buyer (subject to certain limitations).'"

The other defendants in the suit filed Wednesday are Silver Lake Partners, Index Ventures Management, Michaelangelo Volpi, Andreessen Horowitz, and the Canada Pension Plan Investment Board. This lawsuit was first reported Wednesday by The Wall Street Journal.

(Credit: Apple)

For at least the third time this month, Apple and AT&T are being sued by a consumer complaining of being duped into believing that multimedia messaging, or MMS, was already available on the iPhone.

Filed in the Northern District of Ohio on Wednesday (PDF hosted by Wired), plaintiff Deborah Carr says Apple and AT&T misled the public into believing that the iPhone 3GS was capable of sending and receiving MMS messages on the device. The lawsuit claims that Apple's "print and video advertisements...on television, the Internet, the radio, newspapers, and direct mailers" all mention the availability of MMS on the device.

Two similar cases--one in Illinois and another in Louisiana--were also filed against the companies in August.

According to the latest lawsuit, first reported by InformationWeek, customers were told that MMS would be enabled on June 17, 2009, when iPhone OS 3.0 was released.

That seems rather strange, considering that Apple and AT&T announced on June 8, during Apple's Worldwide Developers Conference keynote that MMS would not be available until later in the summer. AT&T confirmed that time frame to Wired on Friday.

"We absolutely will offer MMS on iPhone 3GS and iPhone 3G with 3.0 upgrades in late summer, once we complete some system upgrades that will ensure our customers have the best experience with MMS," an AT&T representative said in a statement cited by Wired.

Carr's lawsuit does admit that Apple has a notice on its Web site explaining that support for MMS would be available from AT&T in late summer. However, the suit characterizes the note as a "mouseprint disclaimer," referring to the small print.

Technically, Apple has enabled MMS in iPhone OS 3.0. The proof is that 29 carriers around the world activated MMS on the iPhone when the new operating system was released on June 17. It's not available in the United States because AT&T isn't ready to activate it yet, which was disclosed on June 8.